Closing bearish ITT Educational Services (ESI) position

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Following a better-than-expected earnings announcement from ITT Education Services Inc. (NYSE: ESI ) , an investor appears to have closed out a bearish options position during morning trading. The August 75 puts were active out of the gate and the majority of the action looks like the investor sold to close these out-of-the-money (OTM) options.

Between 9:51 a.m. EST and 10:06 a.m. EST, a few blocks totaling 3,500 of these OTM puts crossed the tape for $1.15 per contract, which was the bid price when the volume hit the tape. The August 75 puts are home to current open interest of 4,000 contracts. This options action suggests the investor most likely sold to close the August 75 puts on a bet that the stock will not experience as much downside as the original long put position called for.

One possible reason the investor closed a bearish position was ESI's earnings upside surprise. After the closing bell on Thursday, the education company announced earnings of $2.78 per share. This figure beat analysts' estimates by 10 cents. The company also raised is fiscal year 2010 earnings guidance.

ESI shares gained $2.77, or more than 3%, to $87.95 during morning trading. The stock is trading roughly 11% higher than its six-month low of roughly $78. ESI is leading the gains across the education sector out outperforming the broader-market so far on the day.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Options

Referenced Stocks: ESI

Karla Yeh

Karla Yeh

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